Best way to keep recovery agents at bay

If you have taken loan from the bank and have not repaid the amount then you might get nightmare of recovery agent employed by your bank. Firstly the recovery agent will call you and rudely tell you to repay loan amount immediately otherwise you might have to face consequences for this.

There has been an incidence where a BPO employee Sinith Mechery, 25 got call from recovery agent. Mechery says, "It was the worst experience of my life," says BPO employee Sinith Mechery, 25. "Due to some unavoidable circumstances I defaulted on a few loan repayments." He added a recovery agent called him up and rudely demanded that he make an immediate payment. Mechery just hung up on him. "But he called at least 35-40 times that day and his language was abusive. I'd never had an issue with my banks prior to this, but this incident has definitely left a bad taste in my mouth," he says.

Then there was an incidence which shocked the nation, ICICI Bank customer and Mumbai resident Prakash Sarvankar, 38, who had taken a Rs 50,000 personal loan, committed suicide last year, holding a recovery agent responsible for his death in his suicide note.

However there are three persons involved in a recovery story, the lender and the recovery agent. It’s easy to sympathize with the harassed individual, but banks, too, have reasons for outsourcing debt recovery.

Axis Bank chairman and CEO P J Nayak points out, "Axis Bank has an in-house collection department; we also employ reputed third-party collection agencies that comply with non-aggressive methods."

The job an agent, in-house or third-party, is to facilitate the process of recovery. If the borrower doesn't want to deal with a recovery agent, he can directly approach the bank for direct negotiations.

"If there are genuine reasons holding up repayment, we can work with it. For example, credit cards dues can be easily converted to an EMI, which is part payment, instead of the total outstanding due," says Nayak.

Most banks are prepared to make adjustments if the reasons for default are genuine. HDFC Bank spokesperson says that if there is a real problem, the bank works out things as per its policy.

Recovery agents basically work on a commission basis, therefore, are highly motivated to show efficiency.

Arun Saxena, president, International Consumer Rights Protection Council maintain, "Debt recovery agents often treat borrowers in unacceptable, illegal ways. Customers should be careful about giving any money to agents; payments should be made against a proper receipt. One can even approach the National Human Rights Commission if need be."

The important thing is to not get frightened. the Reserve Bank of India has issued guidelines that a recovery agent and the bank that employs him have to honor to protect the interests of both the borrower and the creditor in the debt recovery process.

Earlier this month based on these guidelines, the Supreme Court in one of the case hearing restated that banks cannot deploy goons for recovering loans from defaulters.

Mumbai-based high court lawyer Rohini Pandit says, "The creditors have the right to recover their dues, but there is a right way to so. Laws have to be followed, which is not necessarily followed by many creditors."

The central bank has clearly stated it may ban a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period in case of persistent breach of its guidelines. In fact the RBI can extend the period of the ban or the area of ban.

Hence it is better to be safe otherwise a recovery agent will come into the picture only because you slipped up.

The reasons could be many: overspending, over borrowing, a personal crisis (sickness, loss of employment), or pure bad luck (a loan repayment cheque lost in the post). But at the end you have to be responsible for financial indiscipline.

To help people who have got trapped in debt there are a number of financial counseling centers that offer free service to such people.

Many banks have SMS or email services to alert you on payments. Autopay (or direct debit) is also an easy way to avoid failure to notice on loan repayment cheques.

So it’s better not to take loan more than your capability to repay it back. Though, it is rapidly becoming uncommon.